Strategies Needed for Small Business Sustainability: A Case Study of Thai Restaurants

Abstract Strategies Needed for Small Business Sustainability: A Case Study of Thai Restaurants by Vanida Sirilarbanan MS, California State University, 1976 BS, Thammasat University, 1974

Walden Dissertations and Doctoral Studies Walden Dissertations and Doctoral Studies

Collection

2017

Strategies Needed for Small Business Sustainability:

A Case Study of Thai Restaurants

Vanida Sirilarbanan

Walden University

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Walden University

College of Management and Technology

This is to certify that the doctoral study by

Vanida Sirilarbanan

has been found to be complete and satisfactory in all respects,

and that any and all revisions required by the review committee have been made

Review Committee

Dr Patricia Fusch, Committee Chairperson, Doctor of Business Administration Faculty

Dr Janet Booker, Committee Member, Doctor of Business Administration Faculty

Dr Patsy Kasen, University Reviewer, Doctor of Business Administration Faculty

Chief Academic Officer Eric Riedel, Ph.D

Walden University

2017

Abstract Strategies Needed for Small Business Sustainability: A Case Study of Thai Restaurants

by Vanida Sirilarbanan

MS, California State University, 1976

BS, Thammasat University, 1974

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of Doctor of Business Administration

Walden University January 2017

According to U.S Small Business Association, the failure rates for small businesses in

2014 were as high as 50% to 80% within the first 5 years of establishment Failure rates were especially high among restaurant businesses The purpose of this study was to explore the strategies that small business owners needed to sustain their businesses beyond the first 5 years Guided by entrepreneurship theory as the conceptual framework,

a case study was conducted with semistructured interviews of 3 successful Thai

restaurant owners in Salt Lake City, Utah Member checking and methodological

triangulation with field notes, interview data, company websites, customer comments, and government documents help ensure theoretical saturation and trustworthiness of interpretations Using precoded themes for the data analysis, the 7 themes from this study were entrepreneur characteristics, education and management skills, marketing strategies and competitive advantages, social networks and human relationships, technology and innovation, government supports and social responsibility, and financial planning Two key results indicated the strategies that were needed for small business owners were entrepreneur management skills and government support for small businesses These findings may influence positive social change by improving small business owner

efficiency and sustainability, increasing higher business income, providing a better quality of living for employees and the well-being of the community, and benefiting the U.S economy

Strategies Needed for Small Business Sustainability: A Case Study of Thai Restaurants

by Vanida Sirilarbanan

MS, California State University, 1976

BS, Thammasat University, 1974

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of Doctor of Business Administration

Walden University January 2017

I would like to dedicate this success to my parents in heaven: Anan and Chinda Sirilarbanan I am so grateful what they had given me Without their support since the day I was born, I would not be able to achieve this doctoral degree and make them proud

of me I also would like to dedicate this study to my four children: Monnida, Varaporn, Vorarudee and Patsapong for their love, inspiration, and encouragement Lastly, I would like to dedicate this success to other family members, relatives, and friends: Sawin, Pipat, Evarin, Pathorn, Kamchorn, Chantana, Nuntana, Sunee, Montchai, Chatchaya, Rungtiwa, and many others

The success of my doctoral journey would not have been possible without the guidance, mentoring, and tremendous support from my chair: Dr Patricia Fusch I also want to thank my committee members: Dr Janet Booker and Dr Patsy Kasen, for helping me completed this doctoral study Additionally, I would like to thank Dr Freda Turner for her support through this process

i

List of Tables v

Section 1: Foundation of the Study 1

Background of the Problem 1

Problem Statement 2

Purpose Statement 2

Nature of the Study 3

Research Question 4

Conceptual Framework 5

Operational Definitions 6

Assumptions, Limitations, and Delimitations 6

Assumptions 7

Limitations 7

Delimitations 7

Significance of the Study 8

Contribution to Business Practice 8

Implications for Social Change 9

A Review of the Professional and Academic Literature 9

Entrepreneurship Theory 10

Small Business Success and Sustainability 12

Personal Characteristics and Small Business Owner Entrepreneurship 13

Education, Management Training, and Small Business Entrepreneurship 16

ii

Marketing Strategies, Competition, and Small Business Entrepreneurship 24

Social Networks and Small Business Entrepreneurship 29

Innovation, Technology, and Small Business Entrepreneurship 32

Ethics, Social Responsibility, and Small Business Entrepreneurship 36

Government Support and Small Business Entrepreneurship 39

Restaurant Business Ownership 42

Thai Restaurants 45

Transition 46

Section 2: The Project 48

Purpose Statement 48

Role of the Researcher 49

Participants 50

Research Method and Design 52

Research Method 52

Research Design 53

Population and Sampling 54

Ethical Research 55

Data Collection Instruments 57

Data Collection Technique 58

Data Organization Technique 60

Data Analysis 61

iii

Reliability 63

Validity 64

Transition and Summary 66

Section 3: Application to Professional Practice and Implications for Change 68

Introduction 68

Presentation of the Findings 69

Demographic Characteristics of the Participants 71

Emergent Theme 1: Entrepreneur Characteristics 71

Emergent Theme 2: Education and Management Skills 74

Emergent Theme 3: Financial Planning 77

Emergent Theme 4: Marketing Strategies and Competitive Advantages 79

Emergent Theme 5: Social Networks and Human Relationships 81

Emergent Theme 6: Technology and Innovation 84

Emergent Theme 7: Government Support and Social Responsibility 87

Applications to Professional Practice 89

Implications for Social Change 91

Recommendations for Action 92

Recommendations for Further Research 93

Reflections 94

Summary and Study Conclusions 95

References 97

iv Appendix B: Invitation to Participate in the Study 125Appendix C: Interview Questions 126

v

Table 1 Emergence Nodes/Themes……… 69

Table 2 Node/Theme 1: Entrepreneur Characteristics… ……… 70

Table 3 Node/Theme 2: Education and Management Skills………73

Table 4 Node/Theme 3: Financial Planning……….76

Table 5 Node/Theme 4: Marketing Strategies and Competitive Advantages………… 78

Table 6 Node/Theme 5: Social Networks and Human Relationships……… 80

Table 7 Node/Theme 6: Technology and Innovation……… 83

Table 8 Node/Theme 7: Government Supports and Social Responsibility……… 85

Section 1: Foundation of the Study Small businesses or small and medium enterprises (SMEs) are entities with less than 500 employees (U.S Small Business Administration [SBA], 2013) These

companies include different business sectors in manufacturing and retail businesses such

as hardware suppliers, florists, pharmacies, health care providers, and restaurants (SBA, 2013) In 2013, small businesses contributed 51% of the U.S payroll, 65% of new jobs, and 97.5% of exports from the United States (SBA, 2014) Dahmen and Rodriquez (2014) indicated that the failure rate for small businesses in 2013 was 50% for the first 5 years of establishment This high failure rate has negatively affected the economy and the employment rate of the country (SBA, 2014) I conducted a case study of three Thai restaurants in Salt Lake City, Utah, Untied States, to explore strategies and knowledge needed for small business owners to success and sustain in their business beyond the first

5 years of establishment The implications of this study may improve the sustainability of Thai restaurants and contribute to the business practices and social change for small businesses

Background of the Problem

Small businesses are essential to a growing economy in every country (SBA, 2014) Despite the creation of more than 63% of new jobs in 2013 in the United States, the failure rate of small businesses was as high as 50% to 80% including Thai restaurants (SBA, 2014) The failure rate varies for different industries (Olaison & Meier Sørensen, 2014) Despite the creation of new jobs, the number of entrepreneurs decreased from 5.78 million in 2008 to 5.31 million in 2013 (U.S Bureau of Labor Statistics, 2013) Closures

of small business increased unemployment and caused a loss of government tax revenue (SBA, 2014) Other causes of small business failure include the lack of management knowledge and marketing strategies among small business owners (SBA, 2014)

Moreover, insufficient funds, overexpansion, high competition, lack of government support, or a changing marketplace can cause failures (SBA, 2014) The survival of small businesses is essential for sustaining employment and maintaining the quality of life for employees, the community, and the country

Problem Statement

Small businesses are important for all economies in the world because of their contribution to gross domestic product (GDP) growth, job creation, and government revenues (SBA, 2014) Failure results in financial hardship for owners, employees, and the surrounding community (Zinga, Augusto, & Ramos, 2013) In 2013, the failure rate for SMEs was 50% to 80% within the first 5 years of establishment with high failure rates common among restaurants in particular (SBA, 2014) The general business problem that

I addressed in this study was that small business owners had insufficient training or preparation to sustain a profitable business The specific business problem was that some small business owners lacked strategies to sustain their businesses beyond the first 5 years

Purpose Statement

The purpose of this qualitative case study was to explore the strategies that small business owners need to sustain their businesses beyond the first 5 years The targeted population for this research study consisted of three Thai restaurant owners in Salt Lake

City, Utah These Thai restaurant owners, who had survived and succeeded in their businesses for more than 5 years, participated in open-ended semistructured interviews I also used the official company documents from the Utah Business Search (Utah.gov) for methodological triangulation These official records showed company details such as the registration date, the owner’s name, business status, and the address The implications for positive social change included the potential to improve small business owner efficiency and performance, which may result in higher business income and a better quality of living for employees and their communities The implications of the study may also contribute to the government tax base, the national economy, and increased sustainability

of small businesses

Nature of the Study

Research methods consist of qualitative methods, quantitative methods, and mixed methods (Venkatesh, Brown, & Bala, 2013) A qualitative research method

includes open-ended questionnaires, interviews, and observations, providing insights into the problem, which is appropriate for this research study (Yin, 2014) In a quantitative method, researchers use statistical analysis, which might not be able to provide the

understanding of lived experiences and the complexity of the phenomenon (Yin, 2014) Although a mixed method helps increase the validity, mixed methods require more

resources and expertise (Venkatesh et al., 2013)

The designs for a qualitative method include narrative design, phenomenological

Rossman (2016) mentioned that for a description of an individual life story and

chronological experiences, researchers use a narrative design For the study of the

collective life experiences of more than one person, researchers prefer using a

phenomenological design (Marshall & Rossman, 2016) An ethnographic design provides

a framework for a cultural study of specific groups (Marshall & Rossman, 2016) A case study design provides an understanding of a real-life phenomenon in depth, allowing the

researcher to ask how or why question (Cronin, 2014) Case study designs include

exploratory design, descriptive design, and explanatory design (Yin, 2014) I explored the strategies that small business owners used to sustain their businesses beyond the first 5 years; answering to how and why questions helped me understand real-life phenomenon and behaviors With all these considerations, an exploratory case study design was the right choice for my research study

Research Question

The central question for this study was: What strategies do small business owners need to sustain their business beyond the first 5 years? The interview questions were as follows:

1 Why did you choose to invest in a restaurant business?

2 What is your educational background?

3 Where do you get the training for management skills?

4 What are your short-term and long-term financial plans?

5 What are your competitive advantages?

6 How do you use networking to promote your business?

7 How have you used technologies and innovation to sustain your company?

8 What government support have you used?

9 What else would you like to share about your experiences as a small business owner?

Entrepreneurship includes multiple functions correlated to personal responsibility and competence, which related to psychological, sociological, anthropological, and economic theory (Bula, 2012) Entrepreneurship implies the quality of leadership,

initiative, and innovation in business (Bula, 2012) Cantillon (1755) considered

entrepreneurs as risk takers, who allocate resources to maximize financial return and to equilibrate supply and demand in the economy Cantillon’s research was the foundation for many studies concerning entrepreneurship theories Many other researchers, such as McClelland, Winter, Schumpeter, Casson, and Say have refined Cantillon’s theory of entrepreneurship (Bula, 2012) McClelland and Winter (1971) believed that entrepreneurs are people who make a decision in times of uncertainty for achievement and power

Schumpeter (1983) suggested that an entrepreneur should convert a new idea or invention into a successful innovation Entrepreneurs must be able to fulfill different functions such as allocating resources, be able to adapt personal strengths and

weaknesses, and handle threats and opportunities in a changing environment

(Schumpeter, 1983) Casson (2003) analyzed Schumpeter’s concepts and stated that the primary function of entrepreneurs is decision making Say (1855) emphasized that

entrepreneurs should have competence and management skills in creating innovation, creating a productive workplace culture, and identifying new opportunities for

coordination Based on these entrepreneurship concepts, I explored the strategies that small business owners need to sustain their businesses beyond the first 5 years

Operational Definitions

The definition of terms clarified the meaning of the words used in this study The following definitions were the terms and phrases that appeared in this study

Entrepreneurship: Entrepreneurship is the practice of starting, organizing,

operating, and developing a business or businesses by taking the risk and opportunity to gain profit (Parilla, 2013) For the purpose of this study, an entrepreneur was a small business owner

Passion: Passion is the influence of love, enthusiasm, or pride that induces a

person to make a choice or decision (Roth, Purvis, & Bobko, 2012)

Sustainability: Sustainability is the ability to maintain the level to survive and

remain profitable in business (Lourenço, Jones, & Jayawarna, 2013)

Assumptions, Limitations, and Delimitations

The deficiencies of a research study include the availability of resources, nature of reporting, use of instruments, sample size, and time constraints (Yin, 2014) Researchers need to describe the assumptions, limitations, and delimitations of their research studies

to communicate with their readers regarding the potential effect of the research (Marshall

& Rossman, 2016) These descriptions provide more understanding of the parameters of the research study

Assumptions

Assumptions are facts that are assumed as true without verification, and they can contain risks (Marshall & Rossman, 2016) I assumed that the chosen Thai restaurant owners would truthfully answer the interview questions and that an exploratory case study was an appropriate research design for this study I also assumed that the sample size (three Thai restaurants in Salt Lake City, Utah) was adequate for the study

Limitations

Limitations refer to the potential weaknesses of the study that are uncontrollable (Zivkovic, 2012) I believed that participants would answer the interview questions frankly; however, some small business owners might tend to keep a portion of their data private, particularly financial information Other may have been unwilling to share some

of their business information or did not want to discuss their failures

Delimitations

Delimitations refer to the bounds or scope of the study Delimitations are choices made by the researcher including the research questions, the theoretical perspective adopted, and the geographic region covered (Ridder, 2012) The study of three Thai restaurant owners in Salt Lake City, Utah, might not represent the larger population of all the small businesses in the United States

Significance of the Study

Small businesses consist of farm businesses and nonfarm businesses (SBA, 2013) Nonfarm businesses include manufacturing and retail companies such as grocery stores, hardware suppliers, healthcare providers, and restaurants (SBA, 2013) The nonfarm business sector’s productivity decreased 1.8% in 2013, and the restaurant industry is a nonfarm business (U.S Bureau of Labor Statistics Data, 2014) U.S restaurants served millions of people per day in 990,000 locations, providing $683.4 billion of sales or 4%

of U.S GDP in 2013 (National Restaurant Association [NRA], 2014) Shifting

demographics and changing lifestyles have driven the surge in food service industry (NRA, 2014) Approximately 50% of SMEs, including restaurant businesses, failed within the first 5 years (SBA, 2014) The failure rate can have a significant effect on the contribution of business practice and social change

Contribution to Business Practice

The failure of small businesses within the first 5 years occurred because

entrepreneurs lack direction and planning for running their business, have insufficient management skills, or have inadequate capital and resources for the survival of the firm (SBA, 2013) Some entrepreneurs start a business because they have a passion for it (SBA, 2013) In this study, I explored the strategies that small business owners need to sustain their businesses beyond the first 5 years of establishment, providing knowledge for the type of niche market, management skills, financial planning, and marketing

strategies for an efficient entrepreneur The contribution of the study could be the

increasing of the employment rate, improvement of the country economy, and the tax revenues for the government

Implications for Social Change

Small businesses created 63% of new jobs in 2013 (SBA, 2014) Providing

education to small business owners may improve their skills, strategies, and knowledge, which can positively affect the outcomes for their businesses, their employees, and the community (SBA, 2014) New technologies and networking give small business owners feedback from their customers and the society, which enable entrepreneurs to improve their services and to create innovation (SBA, 2013) The knowledge of management and human relationships for small business owners can help increase employee productivity and customer satisfaction (SBA, 2013) An excellent restaurant can be an important local attraction that increases revenue for the community and enhances the wellbeing of the population (NRA, 2014) Thus, this study may contribute to social change for small business

A Review of the Professional and Academic Literature

Small businesses are vital to the U.S economy (SBA, 2013) Despite their

significant roles, approximately 50% of small businesses fail within the first 5 years of existence (SBA, 2014) To explore the strategies that small business owners need to sustain their businesses beyond the first 5 years, I conducted a qualitative exploratory case study framed by entrepreneurship theories

Researchers explore literature reviews as sources of knowledge for their studies (Yin, 2014) I used the academic literature peer-reviewed databases from ABI/INFORM

Complete, Business Sources Complete, ProQuest, EBSCO Primary, Sage Premier,

Science Direct, government reports and websites, books, and Google Scholar The

keywords I used were small business sustainability, qualitative case studies,

entrepreneurship theory, personal characteristics and entrepreneurship, entrepreneurial education and training, financial planning, entrepreneurial marketing strategies, social networks, innovation and entrepreneurship, entrepreneurial ethics and social

responsibility, government supports, restaurant businesses, and Thai restaurants

Student researchers must have at least 85% literature reviewed sources with the minimum of 60 peer-reviewed for their doctoral research according to the Walden

University DBA Rubric The publication of the 85% peer-reviews must be within 5 years from the student’s anticipated graduation date For the entire study, I cited 196 references with 15 of them more than 5 years from my anticipated graduation date; thus, 92.35% of the reference sources I used, were less than 5 years old For the literature review, I have

177 peer-reviewed articles with six of them more than 5 years from the anticipated

graduation date (96.61%) The following sections included a critical analysis of the literature reviews based on entrepreneurship theory concepts

Entrepreneurship Theory

Entrepreneurs create changes in the economy by taking risks, leveraging

opportunities, and making decisions for achievement and power (Cantillon, 1755; Knight, 1921; McClelland & Winter, 1971) An entrepreneur should have competence and

management skills in creating innovation, productivity, and opportunity for jobs (Say, 1855) Innovation creation is an essential role for entrepreneurs (Drucker, 1994)

Business owners, as entrepreneurs, should have knowledge of consumer behavior,

resource allocation, the creation of innovation, and adaptation to a changing business environment (Schumpeter, 1983)

Researchers applied the relationship of entrepreneur responsibility and

competence with psychological, sociological, anthropological, and economic theory (Bula, 2012) From psychological studies, personality traits for achievement and locus of control are associated with entrepreneurship inclination (Rotten, 1966) Personal

characteristics are inborn qualities or potentials of the individual (Coon, 2004)

Entrepreneurs are likely to have some significant personality traits such as risk-taking,

innovativeness, and tolerance for ambiguity (Coon, 2004) Rotten (1966) defined a locus

of control as a belief in whether the outcomes of one’s actions are the results of one’s

ability (internal locus of control) or the results of something outside one’s control such as luck, chance, or fate (externals locus of control) Business owners who have an internal locus of control believe that they can determine their future by the choices they make (Rauch & Frese, 2000)

By nature, human beings need to accomplish, achieve, and succeed in their

endeavors (McClelland & Winter, 1971) In creating a new and successful venture, business owners require motivation for their achievements (Shaver & Scott, 1991) Based

on sociological theories, the experiences of people could influence their thoughts and actions (Reynolds, 1991) Political systems, government legislation, workforce skills and availability, and competition are examples of factors that can affect the success or failure

of businesses (Reynolds, 1991) Reynolds (1991) stated that the social background of a

person in a social network could indicate the possibility of becoming a successful

entrepreneur Anthropology is the study of culture, which reflects ethnic and social values (Baskerville, 2003) Cultural environments can produce different attitudes and behaviors

of entrepreneurs that may be significant for their success (Baskerville, 2003) Within economic theory, entrepreneurs distribute goods in a competitive marketplace using land, capital, and labor to make products and produce services (Say, 1855) Entrepreneurs are the drivers of the market-based system and the key to small business success through creation and innovation (Schumpeter, 1983)

Small Business Success and Sustainability

Entrepreneurs should have characteristics such as management capability,

leadership, creativity, and risk-taking (Cantillon, 1755; Say, 1855; Schumpeter, 1983) Management knowledge and strategic ability are significant for the success of small business ownership (Frid, 2015) Management of a small business startup can be

challenging, especially when one lacks business experience and knowledge (Frid, 2015) Based on entrepreneurship theory, an entrepreneur’s personal characteristics, skills, and capabilities can affect the success and sustainability of their business (Frid, 2015) Small business owners can avoid failures by learning from other people’s mistakes and obtain the requisite perception and knowledge to sustain their companies (Amankwah-Amoah, 2011)

Some small businesses fail because the proprietor overestimated demand

(Lafuente, Lafuente, Guzman-Perra, & Lafuente, 2013) Before launching a venture, small business owners as entrepreneurs should have marketing awareness of the 4Ps:

product, price, place, and promotion (Lafuente, et al., 2013) Undercapitalization is another reason for business failure; small business owners should have financial and accounting knowledge to avoid this obstacle (Lafuente et al., 2013) They should have management knowledge regarding decision-making and should consider personal

strengths, weaknesses, opportunities, and threats to succeed in competitive markets (Lafuente et al., 2013) Ethics, social responsibility, and government supports are also other important factors for business sustainability (Wells & Graafland, 2012)

Personal Characteristics and Small Business Owner Entrepreneurship

Small business owners need a combination of factors to succeed, including recognition of opportunity, risk-taking ability, leadership, and dedication to the company (Robinson & Stubberud, 2015) Small business owners may need to make decisions regarding borrowing money, selling the existing business, launching a new product, or acquiring another company (Amankwah-Amoah, 2011) Entrepreneurs who tend to overestimate the possibility of failure may not be able to make rational risk choices (Amankwah-Amoah, 2011) Small business owners must realize that every failure and mistake contributes to a learning experience; furthermore, people learn from failure, become stronger, and have more talent to solve their problems (Amankwah-Amoah, 2011) Refusing to take a risk can sabotage potential successes (Amankwah-Amoah, 2011)

Executives such as Steve Jobs (Apple), Bill Gates (Microsoft), and Jeff Bezos (Amazon) experienced failures and were able to take control and drive their businesses toward profitability and success (Hetrick, 2014) Small business owners should take a

risk when they know that a positive result could be better than a current situation and be aware that adopting a personal risk is entirely different from taking risks at the expense of other stakeholders (Amankwah-Amoah, 2011) Small business owners should

communicate with any involved stakeholders to discuss risk/benefit effects (Goldman & Bounds, 2015)

Motivations for people to become small business owners include two types: intrinsic and extrinsic (Martínez-Román & Isidoro, 2013) An intrinsic motivation

implies passion or pleasure to do the activity, which comes from inside of a person For example, individuals who love to cook might want to open a restaurant business

(Martínez-Román & Isidoro, 2013) Extrinsic motivation might refer to the necessity to take action in some situations such as unemployment or dissatisfaction with previous jobs (Martínez-Román & Isidoro, 2013) Learning more about personal characteristics can assist researchers with the understanding of behaviors of a successful small business owner (Martínez-Román & Isidoro, 2013)

Small business ownership competencies, skills, motives, traits, self-image,

leadership ability, specialized knowledge, and social roles enable business owner success and sustainability (Mitchelmore, Rowley, & Shiu, 2014) Small business owners need to learn to generate an idea, recognize personal strengths, take risks, overcome threats and weaknesses, and exploit opportunities (Mitchelmore et al., 2014) Mitchelmore et al (2014) indicated that small business owner management competencies include business operation skills, financial budgeting skills, and human relationship skills Human

relationship skills include interpersonal skills, delegation skills, leadership skills, and communication skills (Mitchelmore et al., 2014)

The characteristics of a small business owner are significant for the success of the business, which includes individual personality, personal traits, entrepreneur orientation, and demographic characteristics (Martínez-Román & Isidoro, 2013) Other important characteristics include self-confidence, autonomy, innovativeness, risk-taking,

motivation, proactiveness, and competitive aggressiveness (Martínez-Román & Isidoro, 2013) Martínez-Román and Isidoro (2013) stated that younger people have less

experience than older people; therefore, a more experienced executive could make

reasoned decisions and address risk management more efficiently than a less experienced manager

Khan, Hui, Chen, and Hoe (2015) studied personal characteristics of Generation Y’s buying behavior of fashion products Some individual characteristics such as

hedonism, lack of control, materialism, mood, and an extrovert personality can influence Generation Y’s buying behavior (Badgaiyan & Verma, 2014; Shen & Khalifa, 2012; Yoon, 2013) Khan et al (2015) used demographic factors for their study including age, gender, education, income, marital status, and occupation They mentioned that money (including credit card availability), time, pleasant store environments, and social

influences might also have the effect on Generation Y’s buying behavior (Khan et al., 2015)

Education, Management Training, and Small Business Entrepreneurship

Experiential learning helps generate understanding and knowledge through life experience (Huq & Gilbert, 2014) Although small business owners have talent, they need to improve their skills by further education and training in their particular field (Oncioiu, 2012) Both unfruitful and fruitful experiences can enhance management skills and knowledge (Oncioiu, 2012) Oncioiu (2012) stated that a successful small business owner should have the capability to transmit their knowledge and vision to their cohorts Business owners must be capable of managing their professional and personal lives using time management (Oncioiu, 2012) Small business owners should be able to provide guidance and opinions to others, in addition to having excellent communication skills and human relationships (Oncioiu, 2012)

real-Small business owners should know their limitations and improve their

knowledge and skills via further education or training (Phillips Moos, & Nieman, 2014)

In developing countries, especially in some underdeveloped countries, women business owners are significant for increasing the country’s economic growth (Phillips et al., 2014) Although the numbers of women in a population are usually greater than the number of men, fewer women business owners are successful in sustaining their

companies when compared with men who own small businesses (Phillips et al., 2014) Some of the barriers for women business owners include balancing home and work roles, lack of ability to access resources, poor financial knowledge, insufficient personal

development, lack of business management training and experience, no business

networks, and social bias influences (Phillips et al., 2014)

A small business owner must have talent, education, and continuous vocational training (Alrhaimi, 2015) Entrepreneurship education promotes personal development for small business owners, which will help them be successful and sustain their

businesses (Lourenço et al., 2013) Many governments try to provide educational

programs to enhance change by creating small business owner-entrepreneurs for the 21st century with skills and abilities such as problem-solving capability, self-direction and initiative, critical thinking, innovation, adaptability, communication skills, and

collaboration skills (Lin & Nabergoj, 2014) Educating young people to have an

entrepreneurial mindset while they are students promotes future entrepreneurship, which

is significant for the economy (Lin & Nabergoj, 2014) Successful small business owners focus on potential business opportunities and learn from failure (Lin & Nabergoj, 2014) Furthermore, small business owners as entrepreneurs have the desire to achieve, which motivates them to turn their idea into action (Lin & Nabergoj, 2014) They seek resources

as well as knowledge of critical success factors to help them succeed and sustain their companies (Lin & Nabergoj, 2014) Small business owners like the challenge of coming

up with new solutions, having a vision, and implementing their dreams (Lin & Nabergoj, 2014)

Small business owners make a stronger contribution to the development of the national economy if they have creativity and ability (Ghina, Simatupang, & Gustomo, 2014) Entrepreneurship education is essential for producing capable small business owners who will create jobs and innovation (U.S Department of Commerce, Bureau of the Census, Business Dynamics Statistics, 2012) Ghina et al (2014) indicated that the

business ownership rates for developing countries are low owing to lack of

entrepreneurial education The small business ownership rate in India is 4.9%, 5.2% in Malaysia, 6.7% in the Philippines, 10.4% in Thailand, and 20.4% in Indonesia (Ghina et al., 2014)

Uddin and Bose (2013) listed the knowledge or skills that small business owners should have including management skills, budgeting, human relations, organizational structuring, marketing strategy, and business operating skills Small business owners should also have knowledge regarding accessing financial resources, technological

resources, and government support (Uddin & Bose, 2013) Business owners view the development and growth of their businesses from strategic, structural, financial, and organizational perspectives (Phillips et al., 2014) Market expansion and competitive advantage demonstrate the strategic growth; the increase in income and profit indicate the financial growth; and the corporate culture and attitudes reflect the structure and

organizational growth (Phillips et al., 2014) The factors that promote these attributes are the availability of resources, organizational factors, the external environment, and

entrepreneurial orientation (Phillips et al., 2014)

Financial Planning and Small Business Entrepreneurship

A successful small business owner must have a business plan that indicates the startup funds that are needed, investment capital required, working capital to obtain, sales forecasts, and funding requirements (Feenstra, 2014) Business owners who do not have enough startup funds may incur fiscal burdens (Feenstra, 2014) If small business owners have enough startup money, they can convince their lenders and investors about their

successful accomplishments when seeking to obtain funds from others (Feenstra, 2014) Having a financial plan assists small business owners to know their cash flow, break-even point, opportunity assessment, strategic development, and profitability prospects (Sihite

& Simanjuntak, 2015) Small business owners can use financial data to calculate financial ratios such as gross profit margin, return on investment, and return on owner’s equity (Sihite & Simanjuntak, 2015) Information from ratios can tell small business owners about a company’s liquidity, operating performance, cash flow, profitability, debt, and investment valuation (Sihite & Simanjuntak, 2015)

Some joint financing funds for businesses are venture capital and angel investing (Bayar, Karaaslan, & Ozdeveci, 2015) The difference between angels and venture

capitalists are sources of money, stage of investment, and size of investment (Bayar et al., 2015) Business angels use their own money for investments, but venture capitalists use funds from other sources such as insurance companies or pension funds (Bayar et al., 2015) Business angels invest in early-stage companies while venture capitalists usually invest in the latter stages (Bayar et al., 2015) The size of the investment for business angels is typical $5,000 to $100,000 while venture capitalists invest from $2 million and more (Bayar et al., 2015) Business angels have financed many well-known companies such as Apple, Amazon, Facebook, and Ford Motor Company (Gregson, 2014) In 2014, business angels funded 73,400 ventures and 316,600 individuals in Europe and the

United States (Bayar et al., 2015)

Frid (2015) studied human capital using multinomial logistic regression with five control factors: firm size, industrial effects, entrepreneur’s growth intentions, the legal

form of the business, and financial projections The author found that the owner

characteristics such as race, sex, education, and experiences could affect company

financing, especially for nascent entrepreneurs (Frid, 2015) Minority nascent small business owners, such as African-American and women business owners have difficulty obtaining a loan because of their experience and educational background (Frid, 2015) These small business owners are unlikely to use credit or an external source of funds and may fear rejection from financial institutions (Frid, 2015) Small business owners have less access to capital markets, creating higher cost, and various additional criteria

required for loan acquisitions than those for larger enterprises (Frid, 2015) Startup

financing, without personal funds from the beginning, typically results in a cash flow deficit (Frid, 2015) Beyond small business owners savings, obtaining money from others such as friends and family will involve trust and affordability, and may result in

management and relationship problems (Frid, 2015) As ventures grow, small business owner-entrepreneurs will move to debt and equity funding and can attract external

investment through social networking (Frid, 2015)

Effective financial risk management is essential to the survival of a small business (Rahman, Yaacob, & Radzi, 2015) According to the World Bank Enterprise Survey, obstacles to success for private enterprises in developing countries are the lack of access

to finance, unsupportive investment climate, inadequate infrastructure, and lack of skills and training (Rahman et al., 2015) Rahman et al (2015) conducted a case study in

Malaysia where 99% of businesses are small business owners and consisted of three main sectors: services, agriculture, and manufacturing These firms have many challenges

including weak accounting systems, financial and technology limitations, lack of

knowledge and skills, high employee turnover, and insufficient government support (Rahman et al., 2015) The authors focused on three main risks: liquidity, credit, and operation risk (Rahman et al., 2015) Rahman et al (2015) explained that to handle the threat of risks; entrepreneurs must identify the risk, analyze, evaluate, manage, monitor, and revise the risk strategies regularly The authors stated that Malaysian small business owners need support from the government for technology, financial accessibility, and entrepreneurial education (Rahman et al., 2015) For example, only 30% of Malaysian small business owners have a website for their business, which is insufficient (Rahman et al., 2015) For small business owners to succeed and sustain their businesses, it is

necessary to build a culture of innovation, risk-taking, decision-making, and sound

management skills (Rahman et al., 2015) To avoid financial risk, small business owners need an accounting system that is accurate, consistent, timely, and complete (Rahman et al., 2015)

External financing, such as bank loans, is another important factor for the survival and growth of small business (Baradwaj, Dewally, & Shao, 2015) Small business owners encounter barriers to accessing financial loans because they often lack a business plan or

a real accounting system, creating difficulty for banks to evaluate corporate capabilities (Baradwaj et al., 2015) Securitization is a helpful tool for obtaining bank loans by

transforming nontradable loan assets into tradable fixed-income instruments Banks use securitization to manage liquidity and credit risk for lending money (Baradwaj et al., 2015) Baradwaj et al (2015) studied the effect of loan securitization on entrepreneurial

activity in the United States The authors found that banks favor the use of securitization for real estate market loans, compared to small business loans (Baradwaj et al., 2015) Banks use securitization to facilitate small business owners’ entrepreneurial activities through channels such as housing markets and mortgage loans (Baradwaj et al., 2015)

Karadag (2015) pointed out that it is important for small business owners to have financial management skills and financial planning A business plan will help business owners to calculate their financial targets such as sales made per employee, a strong profit margin, and a good return on investment (Karadag, 2015) In the case of a new business that has no previous data, the small business owner entrepreneur can use

published financial statements of existing companies within the same industry (Karadag, 2015) The three important financial statements that a firm should have are the cash flow statement, the income statement, and the balance sheet (Karadag, 2015) The cash flow statement shows the expected cash inflow and outflow of the company within a given timeframe (Karadag, 2015) The income statement summarizes company revenue and expenses (Karadag, 2015) The balance sheet demonstrates company assets and liabilities (Karadag, 2015) Long-term financial planning is an annual 3-year and 5-year projection (Karadag, 2015) Small business owners should have short-term financial planning on a monthly basis for the first year and a quarterly basis for the second year (Karadag, 2015)

Karadag (2015) stated that small business owners are the drivers of

socio-economic development in all countries In 2012 in Europe, small businesses represented 98% of all the enterprises, 20.7 million businesses, and 67% of total employment

(Karadag, 2015) In Turkey, they are 99.9% of the companies are SMEs (Karadag, 2015)

Unfortunately, most in Turkey have encountered financial management challenges

related to the severe economic crisis of 2008 (Karadag, 2015) Karadag indicated that the causes of the challenges regarding financial management in the Turkish economy

included insufficient managerial skills, incapability of accessing funds, limited

technological usage, lack of training, and inefficiency in financial management Karadag (2015) described the distinction between large and small companies regarding

experiences, the level of information, social relationships, and ethical values; the author also addressed the industrial environment, strategic decision-making processes, firm culture, and competitive behavior Small businesses are significant for Turkey’s macro economy, so governmental officials take radical steps to support and facilitate the growth

of small business to improve their sustainability (Karadag, 2015)

Martinkute-Kauliene (2014) mentioned that modern information technologies had created complex financial markets; for example, the using of a derivative as protection

against risks and uncertainty A derivative is a contract between two parties to accept

conditions of an agreement such as interest rates, exchange rates, commodity prices, stock prices, and index levels, for a future transaction at a particular point (Martinkute-Kauliene, 2014) Martinkute-Kauliene (2014) conducted a study of risk factors in

derivatives markets that use financial instruments such as forward contracts, future

contracts, options, and swaps for risk management Forward contracts and future

contracts are the processes where both sides agree to buy a commodity or a financial

asset at fixed prices on a certain future date (Martinkute-Kauliene, 2014) The difference

is the former occurs between two parties while the latter is through an organized and

regulated exchange (Martinkute-Kauliene, 2014) An option contract indicates the right

to sell an underlying asset by a specified date at a fixed price, provided the buyer pays

some premium (Martinkute-Kauliene, 2014) Swaps are the agreements between two

parties (associated with future cash flows fluctuation) to manage or hedge risks related to volatile interest rates, currency exchange rates, share prices, and commodity prices

(Martinkute-Kauliene, 2014) Derivative market management is a way to understand, evaluate, relocate, and manage risk to reduce the volatility of capital requirements,

acquire higher capital productivity, and obtain more reliable forecasting Kauliene, 2014) These are challenges that small business owners face as they attempt to finance company growth and sustainability

(Martinkute-Marketing Strategies, Competition, and Small Business Entrepreneurship

Small business owners often perform different functions for the company, such as allocating resources, identifying personal strengths and weaknesses, and handling threats and opportunities in a changing environment (Schumpeter, 1983) Marketing researchers provide information to owner-executives for market strategy planning to manage

competitors and customers (Wilson, 2015) Small business owners should be aware of how to create value for their clients and how to differentiate their products and services (Wilson, 2015) Knowledge of channel distribution also helps improve the effectiveness

of the value chain (Uddin & Bose, 2013) Uddin and Bose (2013) indicated that executives should have the capability to account for demand forecasting and analyzing, pricing policy and strategy, marketing research information, sales training, and product distribution

owner-The marketing mix or 4Ps consist of product, price, place or channel, and

promotion (Osiri, 2013) Osiri (2013) stated that small business owners must understand the needs and problems of their customers to determine what kind of products or services that companies could offer through creative innovation After obtaining customer

feedback, the next thing that small business owners need to consider is pricing (Osiri, 2013) With a pricing strategy, owner-executives decide on a competitive price for the market, which would then correlate with profit margins (Osiri, 2013) Getting the right price involves examining customer’s perceptions, rival products, the cost of

manufacturing, as well as cost of management (Osiri, 2013)

The next marketing decision is the method or channel of distribution, which includes transportation, storage, and a retail site (Osiri, 2013) Reaching potential

customers and turning them into clients requires a suitable channel of distribution such as wholesalers, retailers, supermarket chains, shopping centers, showrooms, or through online websites (Osiri, 2013) The last marketing mix is promotion, which requires

working with tools such as advertising, social media marketing, email marketing, or

search engine marketing (Osiri, 2013) Promotion is the way to communicate with

customers, provide them information, and assist them in making a decision to purchase the product or service (Osiri, 2013) Business owners should continue asking questions and making changes until they have optimized their marketing mix (Osiri, 2013) Small business owners also should review their marketing mix regularly; some elements will need to change as the product or service demand grows when the market matures or adapts to a competitive environment (Osiri, 2013)

The study of small business owners and their marketing concerns have received considerable attention from academic researchers in the early 2000s (Jayawarna, Jones, Lam, & Phua, 2014) Jayawarna et al (2014) mentioned that new businesses frequently have limited resources; as a result, they concentrate on short-term planning rather than long-term planning (Jayawarna et al., 2014) Some small business owners are too busy with the daily operation of the company, and some of them lack skills for planning and analyzing performance (Jayawarna et al., 2014) Small business owners believe that marketing is more necessary for large enterprises than for small companies (Jayawarna et al., 2014) Jayawarna (2014) indicated that market orientation is essential for small

business, and small business owners might not realize they should be using an informal marketing strategy such as sensemaking and social networking

Jayawarna et al (2014) suggested three approaches to small businesses

marketing: guerrilla, buzz, and viral marketing Guerrilla marketing uses low cost and high-effect techniques to attract their consumers, buzz marketing is face-to-face

communication, and viral marketing facilitates new communication technology to spread information and attract customers’ attention (Jayawarna et al., 2014) Jayawarna et al (2014) indicated some behaviors are essential for small business owners such as

creativity, self-responsibility, autonomy, achievement, independence, and risk

calculation It is significant that small business owners know information regarding sociocultural and demographic trends, competitors, customers, and markets to be able to sustain their business (Jayawarna et al., 2014) Manimala (2012) stated that in spite of small business vulnerability to an external environment, strengthening the internal

capabilities of small business owners must include greater priority Small business

owners need the training to develop efficiency and capacity so that they can account for external environments to sustain the business (Manimala, 2012)

Understanding market segmentation is also crucial for market strategy Nabirasool (2014) studied the relationship between consumer lifestyle and demographic factors to learn more about consumer behavior (Nabirasool, 2014) Factors influencing customer purchase decisions may be age, gender, geography, education, income level, product type, buying patterns, and client needs (Nabirasool, 2014) Knowledge of the various market segments assists small business owners in understanding the nature, lifestyles, and trends of the individual consumer in each market group (Nabirasool, 2014) Each

characteristic of the cluster represents changing customer values, attitudes, and behavior patterns (Nabirasool, 2014) For example, a grocery store might note a trend toward Asian foods, spicier foods, or healthier foods (Nabirasool, 2014) Small business owners can then specify essential characteristics of their target markets and then use the

appropriate market strategies to appeal to the changing consumer base (Nabirasool, 2014)

Competitive intelligence (CI) is the gathering, analyzing, and distributing of

information about products, customers, and competitors to support owners, leaders, and managers with decision-making and strategy planning for competitive advantage in the marketplace (Bulley, Baku, & Alan, 2014) Most large firms have departments for

gathering competitive intelligence (Bulley et al., 2014) Although small business owners might not be able to afford a high budget CI, they still can access marketing research free

online by utilizing search engines such as Google or Altavista, to obtain a list of Web

sites that link to specified company websites (Bulley et al., 2014) One of the better ways

to gather competitive intelligence is to speak to customers, employees, suppliers, or competitors (Amankwah-Amoah, 2011) Small businesses can have the advantage over larger enterprises by gathering intelligence more rapidly and at lower cost; however, small-scale owner-entrepreneurs must have sufficient drive and dedication (Amankwah-Amoah, 2011)

Small business owners should do a market analysis to identify direct, indirect, and potential competitors (Sihite & Simanjuntak, 2015) Using market analysis tools will help business owners to know about the market share, pricing, product offers, distribution, and promotion strategies of their competitors (Sihite & Simanjuntak, 2015) Sihite and

Simanjuntak (2015) mentioned that customer-centric companies have the advantage of flexibility to change with the demands of the market The authors suggested some generic strategies based on Porter’s five forces models including cost leadership, product

differentiation, and targeting of niche markets Cost leadership provides entry barriers to competitors and increases market share significantly for a long-term strategy (Sihite & Simanjuntak, 2015) Differentiation creates products that are unique such as different design, new technology, or brand image (Sihite & Simanjuntak, 2015) Using these strategies, small business owner-entrepreneurs need to have marketing skills and use innovation strategies to create brand loyalty and reduce substitutes (Sihite &

Simanjuntak, 2015) Small business owners can build on their strengths by concentrating